imc indymedia

Los Angeles Indymedia : Activist News

white themeblack themered themetheme help
About Us Contact Us Calendar Publish RSS
Features
latest news
best of news
syndication
commentary


KILLRADIO

VozMob

ABCF LA

A-Infos Radio

Indymedia On Air

Dope-X-Resistance-LA List

LAAMN List




IMC Network:

Original Cities

www.indymedia.org africa: ambazonia canarias estrecho / madiaq kenya nigeria south africa canada: hamilton london, ontario maritimes montreal ontario ottawa quebec thunder bay vancouver victoria windsor winnipeg east asia: burma jakarta japan korea manila qc europe: abruzzo alacant andorra antwerpen armenia athens austria barcelona belarus belgium belgrade bristol brussels bulgaria calabria croatia cyprus emilia-romagna estrecho / madiaq euskal herria galiza germany grenoble hungary ireland istanbul italy la plana liege liguria lille linksunten lombardia london madrid malta marseille nantes napoli netherlands nice northern england norway oost-vlaanderen paris/Île-de-france patras piemonte poland portugal roma romania russia saint-petersburg scotland sverige switzerland thessaloniki torun toscana toulouse ukraine united kingdom valencia latin america: argentina bolivia chiapas chile chile sur cmi brasil colombia ecuador mexico peru puerto rico qollasuyu rosario santiago tijuana uruguay valparaiso venezuela venezuela oceania: adelaide aotearoa brisbane burma darwin jakarta manila melbourne perth qc sydney south asia: india mumbai united states: arizona arkansas asheville atlanta austin baltimore big muddy binghamton boston buffalo charlottesville chicago cleveland colorado columbus dc hawaii houston hudson mohawk kansas city la madison maine miami michigan milwaukee minneapolis/st. paul new hampshire new jersey new mexico new orleans north carolina north texas nyc oklahoma philadelphia pittsburgh portland richmond rochester rogue valley saint louis san diego san francisco san francisco bay area santa barbara santa cruz, ca sarasota seattle tampa bay tennessee urbana-champaign vermont western mass worcester west asia: armenia beirut israel palestine process: fbi/legal updates mailing lists process & imc docs tech volunteer projects: print radio satellite tv video regions: oceania united states topics: biotech

Surviving Cities

www.indymedia.org africa: canada: quebec east asia: japan europe: athens barcelona belgium bristol brussels cyprus germany grenoble ireland istanbul lille linksunten nantes netherlands norway portugal united kingdom latin america: argentina cmi brasil rosario oceania: aotearoa united states: austin big muddy binghamton boston chicago columbus la michigan nyc portland rochester saint louis san diego san francisco bay area santa cruz, ca tennessee urbana-champaign worcester west asia: palestine process: fbi/legal updates process & imc docs projects: radio satellite tv
printable version - js reader version - view hidden posts - tags and related articles

Goldman Sachs: Master of the Universe

by Stephen Lendman Wednesday, Apr. 21, 2010 at 4:08 PM
lendmanstephen@sbcglobal.net

Don't bet against Goldman

Goldman Sachs: Master of the Universe - by Stephen Lendman

The status applies to all Wall Street giants, none, however, the equal of Goldman, the Grand Master. Like the fabled comic book Superman hero, it's:

-- faster than its competitors, thanks to its proprietary software ability to front run markets (illegal, but no matter);

-- more powerful than the government it controls; and

-- able to leap past competitors, given its special status.

Founded in 1869, GS calls itself "a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide."

Since going public in 1999, the same year Glass-Steagall ended letting banks, insurers and securities companies combine, GS became a giant hedge fund trading against the advice given clients with the full faith and blessing of Washington - the same thing other Street giants did and profited handsomely.

In his April 17 article headlined, "Goldman Sachs Vampire Squid Gets Handcuffed," L. Randall Wray noted SEC laxity for years, "managing to sleep through every bubble and bust in recent memory," and saying Goldman acts above the law "since it took over Washington during the Clinton years." Their criminal behavior is nothing new. It's their established business model, the reason it's been immersed in nearly all financial scandals since the 19th century.

Wray notes that John Kenneth Galbraith's famous 1954 book, "The Great Crash," had a chapter titled "In Goldman We Trust" on its contribution to the Great Depression through risky investment trusts (an early mutual fund cum Ponzi scheme) sold to unwary buyers.

Goldman and other "whip(ped) up a speculative fever in shares, reaping (highly leveraged) capital gains with other people's money." They were fraudulent pyramid schemes, a "Charles Ponzi-Bernie Madoff scam." Then and today, they collapsed, the way they always do when insiders pull the plug at the same time, cashing out to let their customers take the pain.

At the end of his Goldman chapter, Galbraith recounted this years after the crash encounter before a Senate committee:

"Senator Couzens. Did Goldman, Sachs and Company organize the Goldman Sachs Trading Corporation (to sell junk trusts to unwary buyers)?

Mr. Sachs. Yes, sir.

Senator Couzens. And it sold its stock to the public?

Mr. Sachs. A portion of it. The firm invested originally in 10 per cent of the entire issue for the sum of ,000,000.

Senator Couzens. And the other 90 per cent was sold to the public?

Mr. Sachs. Yes, sir.

Senator Couzens. At what price?

Mr. Sachs. At 104. That is the old stock....the stock was split two for one.

Senator Couzens. And what is the price of the stock now?

Mr. Sachs. Approximately 1 and 3/4.

Buyers then and now lost their shirt, not knowing that betting against Goldman is a sure way to get fleeced. Yet even sophisticated lambs volunteer to be slaughtered, thinking they're as smart, will get out in time, then learning otherwise and discovering Goldman cheats all its clients, even nation states like Greece by hiding its debt and shorting it. Around a dozen US states as well, including California, the same way. Wall Street's culture encourages this and rewards it greatly, the price for getting caught usually fines too small to matter.

Will this time be different? No matter the cost to others, like Enron and Savings and Loan crooks, don't ever bet against Goldman, especially given the SEC's shoddy crime fighting record, picking off small fry but barely slowing big ones, and hardly up to a serious tangle with the Grand Master, regardless of the extent of its sleaze.

So what to make of April 16's breaking news, headlined by New York Times writers Louise Story and Gretchen Morgenson saying the "SEC Accuses Goldman of Fraud in Housing Deal."

The SEC filed civil, not criminal, suit named Fabrice Tourre, "the fabulous Fab," (GS's 31-year old VP involved in creating junk investments), charging fraud. GS, in turn, called the accusations "completely unfounded in law and fact (and would) vigorously contest them and defend the firm and its reputation" - indeed so with all the legal talent billions in ready assets can buy, and no shortage of top tort attorneys willing to line up and take it.

Watch for more suits to follow, but is Goldman sacked? Don't bet on it in what for sure will be long drawn out proceedings, including appeals that will drag on for years.

Case in point, among others - the notorious Exxon Valdez incident after the March 24, 1989 spill, ravaging Alaska's Prince William Sound and Lower Cook Inlet, ruining the livelihoods of area fishermen and residents. Lawsuits followed:

-- In September 1994, 7 million in compensatory damages and billion in punitive ones were awarded;

-- In December 2002, the Ninth US Circuit Court of Appeals reduced the latter to billion.

-- In December 2006, after more appeals, the same court cut another .5 billion; and

-- In June 2008, the US Supreme Court reduced punitive damages to 0 million - the equivalent of about 1.5 days profit from ExxonMobil's first quarter 2008 operations. No company executive went to jail for perhaps the worst environmental crime in history. It was whitewashed for 10 cents on the dollar after nearly 20 years of litigation.

SEC Charges

On April 16, the SEC:

"charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the US housing market was beginning to falter."

Allegations are:

"that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund (Paulson & Co.) played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO" - junk assets its president, John Paulson, made billion on in 2007 by correctly betting on the housing collapse he and GS helped initiate.

"The SEC's complaint charges Goldman Sachs and Touree with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties."

Fabrice Touree was "principally responsible" for the fraud and sent an email before they were sold saying:

"the whole building is about to collapse anytime now," calling himself the "Only potential survivor, the fabulous Fab....standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those 'monstruosities!!!' "

According to the SEC, he wasn't alone as senior GS executives signed off on them. Likely, but unnamed, they include CEO Lloyd Blankfein - profiled on November 8, 2009 in the London Sunday Times saying "I'm doing 'God's work,' " the height of audacity matching the firm's history of criminality and getting away with it.

In their April 17, 2010 article headlined, "Goldman Sachs Charged With Fraud," Wall Street Journal writers Gregory Zukerman, Susanne Craig and Serena NG called GS Wall Street's most profitable firm, "emerg(ing) as a symbol of excess, (having) paid out about billion in compensation to employees in 2009," the firm's most profitable ever year.

In her April 18 article headlined, "Top Goldman Leaders Said to Have Overseen Mortgage Unit," Louise Story said:

"....according to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman....

According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation's economy."

A top level decision was made - short the market at the same time advising clients to buy. Around 99% of the mortgage securities sold went sour. In her April 18 articled headlined "Savage Truth: Goldman Tarnished America," financial writer Terry Savage put it this way:

It was "as if the dealer in a card game had purposely handed all the players the low cards, while dealing himself all the aces and picture cards from the bottom of the deck. Those (in the game) were bound to get fleeced."

One of Goldman's board members, Rajat Gupta, is also being investigated about whether he shared inside information with Galleon Group hedge fund founder Raj Rajaratnam, he then used to initiate trades from June - October 2008. Thus far, no charges have been filed. Gupta said he did nothing wrong, and Rajaratnam had no comment, despite last October being charged with insider trading to which he pled not guilty. For years, Goldman executed Galleon trades. The relationship is close, and Gupta and Rajartnam were former business partners.

The Goldman suit involves an investment vehicle called Abacus 2007-AC1, one of two dozen or more like it for the firm and select clients to bet against the housing market.

The scheme was to sell toxic asset-backed securities (ABSs) to unwary customers (including foreign banks, pension funds, insurance companies and others), then apparently use credit default swaps (CDSs) to profit when they defaulted, or in other words the equivalent of buying life insurance on an undisclosed terminally ill patient. More still, given Paulson & Co.'s role in helping to structure and select assets, then buying CDSs to short them, betting they'll decline. Paulson thus far faces no charges. Goldman's so far are civil. If criminal ones are filed, prosecutors will have to prove intent, perhaps coming given enough evidence to proceed.

On April 19, Wall Street Journal writers Carrick Mollenkamp, Serena NG, Gregory Zukerman, and Scott Patterson headlined, "SEC Investigating Other Soured Deals," saying:

Besides Goldman, the SEC "is investigating whether other mortgage deals arranged by some of Wall Street's biggest firms may have crossed the line into misleading investors."

Definition of Fraud

Black's Law Dictionary, 5th edition, 1979 defines fraud as follows:

"All mutifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling, and any unfair way which another is cheated."

The legal-dictionary.thefreedictionary.com/fraud calls it:

"A false representation of a matter of fact - whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed - that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury."

Criminal and civil frauds differ in the level of proof required - the former needs a "preponderance of evidence;" the latter must prove intent and be "beyond a reasonable doubt."

Times writers Story and Morgenson call the SEC action "a sign (it may be) revitalized." Don't "bet" on it given the agency's deplorable history of being a facilitator, not a regulator, now run Mary Schapiro, a high level industry insider, revolving door into her position before returning to another top spot.

Before being appointed, she was CEO of the Financial Industry Regulatory Authority (FINRA), served as president of NASD Regulation (National Association of Securities Dealers, then was NASD's chairman and CEO. Earlier she was an SEC commissioner, and in 2008, George Bush appointed her to the newly established President's Advisory Council on Financial Literacy, focusing on economic empowerment issues. She was also chairperson of the IOSCO SRO Consultative Committee under Bush, another body supposedly "promot(ing) high standards of regulation in order to maintain just, efficient and sound markets," the same ones manipulated to collapse, while the SEC and other watchdogs stayed silent and watched.

Will SEC go the limit on Goldman, add criminal to civil charges, lodge them against board members and other top officials, then take on other guilty firms? Goldman is the most prominent, but there's plenty of culpability to go around among the major banks and their complicit hedge fund and other trading partners.

According to Karl Denninger:

"The real problem is with these so-called 'complex securities' that are in fact nothing more than a gambling contract designed and constructed in such a fashion as to make proper due diligence impossible. Some of these synthetics had literally 100,000 pages of referenced documentation related to them - how can anyone reasonably expect to read and understand that sort of paperwork?"

Even worse, they're "abusive (because) someone believes that the reference security or securities in question will decline...."

In other words, they're structured to fail - clear evidence of criminal intent by companies and complicit employees, but will SEC officials charge it? Will the Justice Department pursue RICO violations involving the largest financial fraud in history with plenty of guilt to go around? Don't bet on it!

The Power of Goldman

On October 17, 2008, New York Times writers Julie Creswell and Ben White's article headlined, "The Guys from 'Government Sachs,' " showing how embedded they are in Washington - so much so that competitors call them "Government Sachs."

Long regarded as Wall Street savviest firm, "The power and influence that Goldman wields at the nexus of politics and finance is no accident." It has a history and culture of "encouraging its partners to take leadership roles in public service," for the obvious benefit to the firm.

Among insiders, it's widely acknowledged that "no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere." According to some, it's a conflict of interest, since the decisions they make directly benefit the firm.

Former Treasury Secretary Henry Paulson was appointed because of Joshua B. Bolten, former GS alum and GW Bush chief of staff. "And if there is one thing Goldman has, it is an imposing army of top-of-their-class, up-before-dawn uber-achievers."

Other Paulson Treasury stalwarts included:

-- Neel Kashkari - originally ran a 0 billion fund buying toxic assets before becoming Interim Assistant Treasury Secretary for Financial Stability under Paulson, his "right-hand man," according to The Times, playing a major role in selling Bear Stearns to JP Morgan;

-- Dan Jester, former GS strategic officer involved in 2008 Treasury initiatives, especially the Fannie and Freddie takeovers and bailing out his former employer;

-- Steve Shafran, formerly a GS Asian executive involved in Treasury's guarantee of money market funds among other activities;

-- Kendrick Wilson III, "a seasoned adviser to chief executives of the nation's biggest banks;" unpaid, he worked on apprising them of possible Treasury plans to get their reaction;

-- Edward Forst, a former Paulson adviser on setting up the bailout fund, then returned to his position as Harvard executive vice president; and

-- Robert K. Steel, Goldman's former vice chairman, hired to shore up Fannie and Freddie.

Other prominent alumni include:

-- Robert Rubin, former co-chairman and Treasury Secretary;

-- John Corzine, former CEO and chairman, US senator and New Jersey governor;

-- Robert Zoellick, former managing director, Deputy Secretary of State and US Trade Representative, and current World Bank president;

-- Jeffrey Reuben III, former European managing partner and Under Secretary of State;

-- Mark Patterson, former Goldman lobbyist and current Treasury chief of staff;

-- Ed Liddy, former GS board member and Paulson-appointed AIG CEO;

-- Gene Sperling, former Goldman consultant and Deputy Treasury Secretary under Robert Rubin;

-- Robert Hormats, former vice chairman GS International and Under Secretary of State;

-- Stephen Friedman, former Bush National Economic Council director, New York Fed board chairman, and Goldman chairman, now a Goldman board member;

-- George Herbert Walker IV, former Goldman managing director, current mutual fund manager, and Bush family member;

-- John Thain, former GS mortgage desk chief, CEO of the New York Stock Exchange, and Merrill Lynch chairman and CEO;

-- and numerous other prominent GS alums with ties to Washington, the New York Fed, and other institutions of power, including currently under Treasury Secretary Geithner.

Institutional Risk Analytics managing partner Christopher Whalen called Goldman's ties to the New York Fed "grotesque, (giving) the appearance of conflict of interest....everywhere" - under Paulson, unconstrained as Treasury Secretary to stack the agency with his cronies and run it like a GS subsidiary.

A Brief History of Goldman Sachs, Courtesy of the Wall Street Journal

-- founded by Marcus Goldman in 1869;

-- in 1906, became a major player in the IPO (initial public offering) business;

-- in 1929, Goldman involved in the market crash, suffers big losses like others on the Street;

-- in 1930, Sidney Weinberg (aka "Mr. Wall Street") becomes CEO;

-- in 1956, GS is Ford's lead underwriter;

-- in 1969, Gus Levy succeeds Weinberg;

-- in 1976, John Weinberg (Sidney's son) succeeds Levy;

-- in 1981, Goldman acquires J. Arons & Co., a commodities trading firm;

-- in 1990, Robert Rubin and Stephen Friedman succeed J. Weinberg, expanding the company globally;

-- in 1999, CEO and chairman Jon Corzine resigns as co-head, leaving Henry Paulson in charge;

-- in 2006, Paulson becomes Treasury Secretary; Blankfein succeeds him;

-- in 2008, Goldman becomes a bank holding company to have easier access to liquidity and funding;

-- in 2009, Goldman has its most profitable ever year;

What's Next

Goldman stands civilly charged. Will criminal ones follow? One executive only was named. The firm's loyalty to clients has before been questioned. It calls the accusations "unfounded" and claims no responsibility for the credit crisis. So far, its public image alone is tarnished as the symbol of popular outrage, but its profits are the highest ever.

Will key top executives be hung out to dry? Will those from other top firms follow? If past is prologue, look for modest fines to be levied, appealed and lowered; perhaps a few prosecutions below the top; pleas to be copped for light (later reduced) sentences; and so-called "financial reform" to become law, the kind this writer addressed in an article titled, "Bogus Washington-Proposed Financial Reform," amounting to "show," but little "dough" to assuage public anger.

It will leave business as usual unchecked, so ordinary people will remain "sitting ducks to be scammed again with the full faith and blessing of Washington" - where everything changes but stays the same, and each party is as corrupt as the other.

Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour/.

Report this post as:

LATEST COMMENTS ABOUT THIS ARTICLE
Listed below are the 10 latest comments of 1 posted about this article.
These comments are anonymously submitted by the website visitors.
TITLE AUTHOR DATE
Goldman Sachs Made a Bundle off The Bush/Obushma Bailout for Banksters The Bush/Obushma Bailout For Banksters Wednesday, Apr. 21, 2010 at 7:51 PM

Local News

Change Links September 2018 posted S02 10:22PM

More Scandals Rock Southern California Nuke Plant San Onofre A30 11:09PM

Site Outage Friday A30 3:49PM

Change Links August 2018 A14 1:56AM

Setback for Developer of SC Farm Land A12 11:09PM

More problems at Shutdown San Onofre Nuke J29 10:40PM

Change Links 2018 July posted J09 8:27PM

More Pix: "Families Belong Together," Pasadena J02 7:16PM

"Families Belong Together" March, Pasadena J02 7:08PM

Short Report on the Families Belong Together Protest in Los Angeles J30 11:26PM

Summer 2018 National Immigrant Solidarity Network News Alert! J11 6:58AM

Watch the Debate: Excluded Candidates for Governor of California M31 5:20AM

Change Links June 2018 posted M28 7:41AM

The Montrose Peace Vigil at 12 Years M22 8:01PM

Unity Archive Project M21 9:42AM

Dianne Feinstein's Promotion of War, Secret Animal Abuse, Military Profiteering, Censorshi M17 10:22PM

CA Senate Bill 1303 would require an independent coroner rather than being part of police M10 9:08PM

Three years after OC snitch scandal, no charges filed against sheriffs deputies M10 8:57PM

California police agencies violate Brown Act (open meetings) M02 8:31PM

Insane Company Wants To Send Nuke Plant Waste To New Mexico A29 11:47PM

Change Links May 2018 A27 8:40AM

Worker-Owned Car Wash on Vermont Closed A27 5:37AM

GUIDE TO REBEL CITY LOS ANGELES AVAILABLE A13 12:39AM

lausd whistle blower A11 6:58AM

Website Upgrade A10 10:02AM

Help KCET and UCLA identify 60s-70s Chicano images A04 8:02PM

UCLA Luskin: Casting Youth Justice in a Different Light A02 6:58PM

Change Links April 2018 A01 6:27PM

More Local News...

Other/Breaking News

Muselières syndicales, muselières patronales S21 7:19AM

Jeff Bezos, Amazon, The Washington Post, Whole Foods, Etc S21 2:50AM

Why Choose Nut Milk Over Cows' Milk S21 1:01AM

Antrhopocène, le grand effondrement S19 9:53AM

Creative Destruction Hack Diamonds Windows/iOS/Android - Creative Destruction Generator S19 12:51AM

Abolir l'économie S18 11:18AM

The Dictatorship of Corporations S17 5:26PM

18 Lethal Consequences Of Hunting S17 3:13PM

Paraphysique de l'outplacement déontologue S15 6:51AM

Creative Destruction Hack Mod Generator S15 3:49AM

Shopping du bashing S14 8:42AM

After Lehman Brothers, Experts Say Global Financial Crisis Can Happen Again S13 8:28PM

“Animaniacs in Concert!” Starring Voice Legend Rob Paulsen S12 9:30PM

Probabilités de fin d'humanité S12 6:49AM

Florida Area of Migrant Farmworkers Denied Right to Construct Health Clinic near NaplesCIW S11 2:57AM

Propagande de virus, virus de propagande S10 7:34AM

Steer clear of work morality! S09 12:10PM

Sweatshop Lodge Ceremony Continues in US Fed Prisons Led by Inmates S08 6:17PM

Paraphysique de l'origami S08 7:11AM

The Shortwave Report 09/07/18 Listen Globally! S06 11:23PM

August 2018 Honduras Coup update S06 12:28PM

Du réussissement putréfié S06 10:55AM

Brett Kavanaugh Filled The 5th Circuit With Execution Judges S06 6:14AM

Log S06 4:25AM

Augusta Georgia Woman Gets 5 Year Prison Sentence for Writing About Russians Crime Acts S05 8:29AM

Paraphysique de contextualité S05 8:29AM

Crisis Regulation in Global Capitalism S03 3:39PM

Ex-voto de réification S03 10:24AM

More Breaking News...
© 2000-2018 Los Angeles Independent Media Center. Unless otherwise stated by the author, all content is free for non-commercial reuse, reprint, and rebroadcast, on the net and elsewhere. Opinions are those of the contributors and are not necessarily endorsed by the Los Angeles Independent Media Center. Running sf-active v0.9.4 Disclaimer | Privacy